Karachi, June 22, 2018 (PPI-OT): Moody’s downgrade weighs down on KSE-100, down 4.7% WoW
Any sort of a festive mood that investors might have been harbouring post Eid holidays was quickly wiped off, as the KSE-100 index nosedived this week by a whopping 2,043 points (down 4.7% WoW) to close at 41,637 level. The main reason in our view for the battering the local bourse took was the decision to downgrade Pakistan’s outlook from ‘Stable’ to ‘Negative’ by Moody’s, the international credit rating agency, citing precarious external accounts scenario and consequently, depleting foreign exchange reserves. As if on cue, the State Bank of Pakistan (SBP) released external account data for the month of May-2018, where the Current Account Deficit (CAD) stood at US$1.9bn (7.8% of GDP), up 33% YoY.
Additional jitters were created by further pressure on the local currency, which reached a low of nearly Rs126 against the US$ in the Open Market. On the bright side, volumes picked up during the week, with daily average volumes jumping 29% WoW to reach 170mn, while Average Traded Value also rose 14% WoW. Foreign selling returned with a renewed vigour, with net selling of US$23mn during the week, compared to US$4.3mn in the previous week. Major sectors that felt the heat of worsening conditions included Cements (down 6.8% WoW), Banks (down 5.7% WoW) and Automobiles (down 6.4% WoW). Other key highlights during the week included (1) Foreign exchange reserves held by the SBP rose to US$10.26bn, up 2.0% WoW, (2) Textile exports rose 28% YoY during the month of May-2018, led by 41% YoY rise in Yarn exports, along with double-digit growth in value-added exports, and (3) Supreme Court ordering offloading and handling of coal to be shifted from Karachi Port to Port Qasim.
SC calls FBR chief, others on taxation of POL products
The Supreme Court, on account of excessive taxation on petroleum products, summoned the FBR chairman, along with the Secretary Ministry of Petroleum and the Managing Director PSO in the case to determine prices of POL products and existing taxation. The court has sought past six months’ import of POL products and other info to determine local market prices.
Circular debt jumps to Rs547bn
Energy sector’s circular debt stood at Rs547bn in Jun-2018, owing to low recovery, high losses, mismanagement and non-technical bureaucracy in the Power Division.